Ask HN: Did offering a money-back guarantee help your business?

https://news.ycombinator.com/item?id=19085526

by nCHc • 7 years ago

215 153 7 years ago

news.ycombinator.com

I assume it will boost initial conversions significantly, but does it produce a long term net gain?

As a consumer, I've seen approaches ranging from very generous "no questions asked", to "you can have a refund if you jump through 100 hoops", to "all sales are final". Are there any guidelines around which approach to use?

I'm specifically concerned about one-time digital purchases, where once the customer has the file/valuable info there's nothing to stop them from keeping it and requesting a refund.

thehodge• 7 years ago

We have a small low touch SaaS business with a 30 day money back guarantee, We've had maybe 3 people ask for there money back in the year of having it but it didn't affect conversions significantly

VBprogrammer• 7 years ago

What seems like such a simple question unfortunately is probably quite difficult to answer. At best you could find someone who ran a high quality A-B test where the result showed something interesting. But you still have no idea whether that changed over time after the A-B test finished.

I think the main question is was the number of refund requests significant? If it was trivial then any marginal benefit is very low risk.

Patio11 has written quite a bit about his experience. Worth having a read of his blog if you haven't already.

https://www.kalzumeus.com/archive/

louisswiss• 7 years ago

Yes. There are a few advantages to offering a money-back guarantee for your product. Especially for a one-time digital purchase:

- As you correctly assume, conversions will be higher with a money-back guarantee than without (although you do have to make it obvious that there is one in your marketing)

- More importantly, unhappy customers will get their money back either way. If you don't offer a refund, you'll just have customers making charge-backs via their credit card provider. These chargebacks are pretty much impossible to combat for digital products, and can cost you $15-$100+ on top of the refund per chargeback.

Even worse, too many chargebacks can lead to your payment processor freezing/closing your account.

gus_massa• 7 years ago

Some (old) article with similar ideas (see #7) https://www.joelonsoftware.com/2007/02/19/seven-steps-to-rem...

no1youknowz• 7 years ago

customers making charge-backs via their credit card provider. These chargebacks are pretty much impossible to combat for digital products

It's not impossible. Companies such as Chargebacks911 worked with Clickbank which is an affiliate program selling digital content to reduce their chargebacks quite significantly.

More information here: [0].

Some credit card companies are now electing to work with both Kount and CB911 into their stack.

[0] https://www.kount.com/case-studies/clickbank-chargebacks911

Disclaimer: I don't work with either company but spent the last 2 years looking at the whole fintech stack for my startup and know (almost) all the players in the space.

ggambetta3• 7 years ago

Waaaay back in the day, when I was running my game development company [1], I put that on the website - an unconditional, no questions asked money back guarantee. As you said, nothing stopped customers from keeping the game. However, in 10 years or so selling games, only a handful of people ever asked; and I complied, of course.

Focus on the customers who _are_ willing to pay. Invest the time and energy you'd spend fighting pirates, fraudulent requests for returns (as defined in this post), etc, in making a better product.

I do have some really fun stories about antagonising the pirates - but do it as a hobby, not as part of your business strategy.

[1] http://mysterystudio.com

sametmax4• 7 years ago

Besides, you can ban credit card number of abusers. It's easy to create an email, it's harder to get a new credit card.

chrismeller3• 7 years ago

It’s not hard at all to get a new credit card. Report it lost and get a new one. In the US I’ve never seen a bank charge for it, and several times have simply gotten a new one sent to me unprompted because the bank had been informed the card was compromised. Sure it’s not the same as creating a new gmail account, but it’s still incredibly easy.

Also, banning credit card numbers is going to be problematic... most smaller operations are not (and should not) be handling their own payment processing and should never have access to card info. Even if you do and you hash it to match against that’s iffy from a security perspective and would likely run afoul of any decent PCI auditor.

astura2• 7 years ago

I have over 20 credit cards, its hardly difficult to get a new one. Combine that with services like privacy.com and Bank of America ShopSafe and credit card numbers can be infinitely generated.

clubm8• 7 years ago

Besides, you can ban credit card number of abusers. It's easy to create an email, it's harder to get a new credit card.

Several CC issuers offer virtual card numbers for online purchases you can generate many #s with one card easily

slig2• 7 years ago

I do have some really fun stories about antagonising the pirates - but do it as a hobby, not as part of your business strategy

Did you publish them anywhere? Thanks

ggambetta3• 7 years ago

Just published one as a reply to a sibling post :)

Buttons8403• 7 years ago

I do have some really fun stories about antagonising the pirates

Please tell us. :)

ggambetta3• 7 years ago

My favourite one is that at some point there was a lot of piracy happening in a forum. Someone would post "Hey, I'm looking for <Game X>, thanks", and someone would reply "Here's a link to the zip: <link>". Sometimes people would reply "the link is broken", or "thanks", or "the zip has a virus".

After fuming for a couple of days, I discovered that you could post to this forum without needing to register, and that you could post via a simple HTTP form post (this was before REST APIs). I figured that if the website couldn't be taken down (guess which country hosted it...), at least I could make it less useful!

So I wrote a bot that would periodically scan for posts asking for zips, and post replies with bit.ly urls that went nowhere. It also scanned for replies to posts that contained links, and randomly replied "the link is broken", or "thanks", or "the zip has a virus", all using a simple text generator with phrase templates, an username generator, and a game name generator.

What I didn't anticipate, but was obvious in retrospect, was that the bot started posting fake replies to its own fake posts. So for a few days, my bot was essentially running the forum by itself!

I eventually fixed this, as hilarious as it was. To get around IP blocking and rate limits (which I'm unsure I ever actually found), I distributed this bot to a handful of fellow indies whose games were being pirated in the same place as well.

I don't remember how or why I stopped using this, or whether it ever made any difference to our bottom line, but it was a silly source of entertainment for a few weeks :)

franze2• 7 years ago

this is my money back guarantee for my workshops[1]

  >If you state after the workshop:
  >
  >that you care less about SEO now - and
  >that you learned nothing new - and
  >that your understanding of SEO has not been improved - and
  >that you have the feeling that you have wasted your time
  >then i will not take your money! I will even invite you for lunch that we can talk about why i failed you.
  >Note: that's a logic "and" (think &&, not an ||)

i never had to pay anything back and it takes some preasure out of the investment - if it's a private person wher the invested money matters. i got some positive feedback for it and it's another marketing opportunity.

for books sold over the internet there is a 14 days money back gurantee anyway in the EU, but nobody ever used it anyway [2]

[1] https://www.fullstackoptimization.com/workshop

[2] https://www.fullstackoptimization.com/b/understanding-seo

jstanley• 7 years ago

That's a pretty impotent guarantee. I think it should be an "or" rather than an "and".

Let's say your course is just you staring into space for 3 weeks while we all sit in silence. We sit in silence for 3 weeks, but I still care about SEO, so I'm not eligible for a refund.

Waterluvian• 7 years ago

I like your intent, but speaking as a social hermit, if I read this, I would just be scared to ask. To me, it reads as an entrypoint for an uncomfortable pressured sales pitch.

What I want to hear is:

"If you finish the workshop and you feel like you wasted your time, I will give you your money back."

And then feel free, after politely saying, "I'm sorry this wasn't your thing, here's your refund", please do ask some "why" questions. If I'm eager to talk about it, then feel free to ask me to lunch.

Just don't make it sound like my refund is walled behind a lot of conditions and even more effort.

franze2• 7 years ago

most of the time it's actually a good starting point for discussions after the workshop, as they can tell me what they found valuable and what they not found valueable.'

additionally my audience is devs, so the && vs || distinction makes it clear that we (can) use the same language

lol768• 7 years ago

The condition should be based solely on whether the delegate felt, following the workshop, that there was a significant discrepancy between the expected and actual value delivered by the training.

As others have mentioned, this feels a bit .. overly-prescriptive and even a little patronising ('the way you feel must tick these 4 boxes otherwise you are not being reasonable' is what I feel it conveys), though I think the intent was good. What if I learnt one small thing, but didn't feel that the rest of the workshop was useful?

eps• 7 years ago

Yeah, this reads like a complete BS rather than a "guarantee" if you pardon my French. Specifically worded to be unenforcible and to discourage anyone from even trying.

That bit about inviting to lunch is basically "You clearly think I wasted you time and you are most likely upset with me (or think I am a scammer/poser/etc.), but let me drag you out to waste even more of your time AND make it truly personal."

anacleto• 7 years ago

Yes. [0]

[0] https://www2.bc.edu/thomas-chemmanur/phdfincorp/MF891%20pape...

crankylinuxuser• 7 years ago

"all sales are final"

If you take credit cards, no sale is final until the CC company finalizes settlements. The times for this can vary depending on card handler.

I know I use this to defend myself against unscrupulous or otherwise questionable merchants. But this can be easily turned to a bludgeoning weapon for customers to get their own way.

Anecdotally, I know over on reddit /r/ulpt "buying" and disputing or chargebacks are seen as getting free swag. Unethical in the extreme, but it works. The CC companies don't want to alienate customers from legit and bad transactions.

pbhjpbhj2• 7 years ago

The Consumer Rights Act in the UK limits claims for refunds for supply of defective goods to 6 years IIRC, so it's not just credit card companies who will reverse a transaction ex post facto.

octocode• 7 years ago

As a customer: if I am on the fence about a product, I will rarely buy anything that does not offer some kind of money-back guarantee, even if the cost is only 10 dollars. I've been burned before by buying products or services that turned out to be trash, and offering a guarantee shows some level of faith in what your company offers. I've only requested a refund a small handful of times.

Most recently I bought a $550 dollar online course and the 1 year unconditional money-back guarantee was 100% the deciding factor for me to try it. I ended up loving it and will not be requesting a refund.

golanggeek• 7 years ago

What course was it?

gtsteve2• 7 years ago

I don't run this sort of business but I recall reading in a book (I believe Tim Ferris' 4 hour work week) that he offered a 110% money back guarantee and in the entire history of his business only one person took him up on it.

I've not seen the 110% money back guarantee in the wild however but it feels like a memorable offer. You'll have to carefully figure out how to avoid getting taken advantage of but I feel it might be a worthwhile risk.

mruts• 7 years ago

Man, someone should have created a trading desk around his refund policy. I'm not sure how much his product was (or what it was), and the returns don't compound, but still.

gtsteve2• 7 years ago

Perhaps you'd write into your terms of business that you could only have one refund per person per year or something like that to limit this sort of edge case behaviour.

I recall it being a sports nutrition business but selling something reasonably unique. I would estimate that it would be an average sale of $50-$100, perhaps a high of $300?

So long as you're making decent sales an occasional hit of $5-$10 and the even rarer hit of $30 is hardly terrible.

nickjj4• 7 years ago

This is an old copywriting tactic that has been around for decades. It's the "too good to be true" policy. It's just a way to make people think "wow, how does he stay in business!". It really makes you think that their product is very good.

I vaguely remember some book author having an interesting typo related policy. His claim was, for each typo reported in his book, he would start out by paying 1 penny, and for the 2nd typo he would pay 2 pennies then 4 pennies then 8 pennies and so on. It was a crazy claim because if you double your pennies 30 times, it's over $5 million dollars. I can't remember who did this, but how's that for an incentive to buy the book haha.

tome• 7 years ago

Are you thinking of this?

https://en.wikipedia.org/wiki/Knuth_reward_check

Casseres• 7 years ago

I occasionally see offers like that, and all it does is make me think there's a catch that makes it almost impossible to redeem.

After reading the comments here, I could be wrong.

kentt• 7 years ago

What did he offer this 100% guarantee on? I read this book and thought it was awful.

throwaway5752• 7 years ago

I think, at least, that it will motivate you and put you in the bet mindset to please your customers.

quaffapint• 7 years ago

I've often wondered which is better for a saas to offer...

Money-back guarantee for x days

-or-

x day Free Trial

...I would think the first would be easier to manage, but will the free trial pull more people in?

bachmeier• 7 years ago

Speaking for myself, the free trial will always win. If I've paid, that means they have my credit card number, and it can be hell getting some companies to stop charging. Of course, that means I only go with free trials that don't require a credit card number. I know why companies do the things they do, but I don't care, I'm not going to get sucked into a lengthy, multi-call game to get them to stop charging my credit card.

mikepurvis• 7 years ago

It amounts to the same thing, so this is more about psychology than anything else. It's like the difference between a discount for X and a surcharge for !X.

I feel like you'd have to A/B test your particular market to really know for sure.

pbhjpbhj2• 7 years ago

The free trial is better for customers, the money-back will get your more money.

Spooky23• 7 years ago

They are different things. As a customer, I always prefer a solution where my money remains in my pocket.

Depending on the product, a timeboxed trial may not make sense. If I'm buying shoes, it makes sense to have a guarantee. If I'm consuming a productized service, the trial makes more sense. (to me)

theNJR9• 7 years ago

I was the CMO for a unicorn CPG[0], so slightly different take since we sold a physical product.

We went crazy with our money back guarantee. We had countless people whose 'dog' ate their product while still on the doorstep. One person said their cows ate $250 worth. Another person bought a few hundred dollars worth used from someone on a random forum. They all wanted a full refund. A newly hired email marketing coordinator mistakenly sent an offer for free product to 50,000 existing customers that was meant for a small group of new customers.

In every instance, we didn't think twice and gave them what they wanted. The outlier bad actors didn't make a dent when you looked at the entire business.

The philosophy that they were exploiting is what made us worth $1bn.

[0]https://www.inc.com/profile/quest-nutrition

WrtCdEvrydy5• 7 years ago

You'd be surprised how few people are willing to be bad actors.

The other thing is that tests have proven people trust more if you offer a warranty or even a money-back warranty.

Skullcandy headphones are a great example, they're budget headphones that are nothing out there, a little pricy but they have a lifetime warranty. What's a lifetime warranty? They'll replace them as long as you are alive.

gk1• 7 years ago

V-Moda had (still have?) a similar warranty on their headphones. They broke every year like clockwork, and every time I mailed it in for a brand new pair. This went on for at least four or five years.

theNJR9• 7 years ago

Agreed. I remember those bad actors because they were so extreme and rare. Certainly less than 1%.

sct202• 7 years ago

You just have to be careful if the bad actors start to recruit other bad actors. There are discords and Facebook groups that are dedicated to sharing where you can exploit a generous policy or error.

JohnFen2• 7 years ago

The other thing is that tests have proven people trust more if you offer a warranty or even a money-back warranty.

Personally, in my own purchasing decisions, warranties mean nothing to me (They're a huge hassle, and I've never had an experience with warranties that didn't make me feel like I've been ripped off) -- but money back guarantees mean a huge amount.

Buying something without trying it first is a very risky thing to do. A money-back guarantee (particularly a no-questions-asked one) removes that risk from me and makes it much more likely that I'll take a chance on a product.

Buttons8403• 7 years ago

Wonder how many of those people (who I'm assuming were frauds), tried to "make it up to you" by speaking well about your company to others. Seems like something a psyche might do to balance out the lie; "Yes, I lied, but I made it up to them by saying good things about them to my friend, so I am still a good person."

And perhaps more importantly, how many of them would have gone on a campaign of vengeance had you not given them a refund, and spoken badly about your company to perhaps thousands of people through online forums.

jjeaff• 7 years ago

The cows one at least, is likely true. Cows are very curious and will tear into anything new. Especially any new box they find. Not a good idea to let them get up near your house, but not that uncommon either.

I once saw a cow take a big cow sized bite out of the brand new, exposed vinyl seats of a speed boat that was parked in the driveway. She didn't seem to like it, but she took a few more bites just in case.

cmiller1• 7 years ago

One person said their cows ate $250 worth.

That's what you get in the luxury grass as a service business!

theNJR9• 7 years ago

GaaS, baby!

xkfm• 7 years ago

I can't believe Quest Nutrition was founded in 2010. I started exercising regularly around then, and I remember people talking about it being the only bar worth buying in like 2011-2012. Based off how people talked about the company, I thought it would have been around since 2003-2005.

theNJR9• 7 years ago

Did you find us on Reddit? I made it a mission [0] to be the most talked about bar on Reddit in 2011/2012.

[0]https://www.nicholasjrobinson.com/blog/culture-2-0/hacking-h...

rsp1984• 7 years ago

This is a great piece of advice. However I think it should be added that a strategy that works for snack products (sub $10 purchase) may not be successfully transferred to more expensive products.

It only works as long as the effort for a money-back is essentially not worth most customers' time. This is almost always the case for a sub $10 product, but the economics look different for e.g. a $100 product or a $1000 product.

monksy• 7 years ago

I've seen stuff from you guys. That looks amazing what you're doing (keto comptabile chips) I'm going to have to try them.

theNJR9• 7 years ago

We made this entire line of frozen Keto meals, but were 2 years too early. Should have raised some VC and spun that out. The tortilla chips are insanely good though.

sqlacid• 7 years ago

I wish the didn't use Sucralose in their protein bars; or even stevia, it's like a bad aftertaste on top of a bad aftertaste.

PedroBatista• 7 years ago

This works, but you better have a sizable and stable business that already has been proven, and now want to increase volume by removing risk and uncertainty from the minds of potential customers.

If you're in the red, strapped for cash and still figuring out if your business works, that would be a hell of a gamble.

muzani3• 7 years ago

Actually it works far better for new businesses. People don't know your product and won't risk it, especially buying online. The guarantee leads to a hell lot of sales and marketing.

People avoid manipulating the little guy and usually the people at your doorstep early on are quite desperate for a solution.

If anything, this scales poorly to large companies, because they get on exploit forums and it's difficult to train staff to make the call differentiating between valid and fake claims.

enraged_camel• 7 years ago

Zappos has a similar policy with regards to their unlimited free returns and exchanges. They have a tiny group of customers who abuse the hell out of it (and all their customer service reps know who those are), but by and large the policy is responsible for Zappos's massive success (before it was bought by Amazon).

andrewSC2• 7 years ago

Can you apply this same approach (i.e. full refund to an unsatisfied customer) and still be successful as a consultant/freelance? I feel like the stakes are higher because the client could rack up a huge bill then play the “unsatisfied” card leaving you high and dry for your time.

davidscolgan• 7 years ago

If the service is writing code, I won't give them the work if they end up wanting a refund. If the service is something monthly, I'd only offer a guarantee on the first month. So I'd say it would still definitely work for freelancers/consultants. Jonathan Stark has a lot of material about this subject that covers more of the nuances.

NicoJuicy2• 7 years ago

Lol, I actually like the bars :p

They have a lot of sodium though

theNJR9• 7 years ago

The ‘salt is bad’ meme is about as dead as the ‘fat is bad’ one.

A study [0] of over 90,000 people found that “… At moderate intake, sodium may have a beneficial role in cardiovascular health, but a potentially more harmful role when intake is very high or very low. This is the relationship we would expect for any essential nutrient and health.”

[0]https://www.thelancet.com/journals/lancet/article/PIIS0140-6...

3pt14159• 7 years ago

What does CPG stand for?

mikek• 7 years ago

Consumer Packaged Goods

meko• 7 years ago

Quest bars are amazing... Wish they were vegan though. I miss em.

organicdude2• 7 years ago

Every marketing tool has it's place.

A guarantee is only useful if:

1. You need to lower perceived risk of using your product. 2. You need to demonstrate confidence in your product.

There are dozens of other conversion problems that won't be addressed by a money back guarantee.

ARandomerDude• 7 years ago

3. You need a tie-breaker between your product and your competitor's.

organicdude2• 7 years ago

Perhaps. If customers are really doing their research and there is no other way to differentiate, sure. In a perfectly rational world for sure.

But there is a real cost of offering a money back guarantee: it may be distracting you from other issues. It may encourage a "throw stuff against the wall and see what sticks" type of mentality. Which can get you started, but random experimentation based on "best practices" and "do what the others are doing" is not the shortest path to very high conversion rates.

The real way to increase conversions is to "sleep with your customers". Get to know them so well, you know what their heart wants. You know the real reasons why they want your product or a similar one.

And then fulfill those desires. Give them what they want and explain it in a way that they understand.

But if you don't know your customer, which takes just a few days of conversation...well, you're throwing darts on at a "best practices" dartboard.

If you do your homework, you can narrow it down to:

I don't understand your product. I understand your product, but I don't see how it would help me. I don't trust you. I can't figure out how to do X on your website. Your product is priced too high/too low.

A money back guarantee does nothing to address to above 5 objections.

SatvikBeri5• 7 years ago

As a consultant, offering a limited money-back guarantee was a huge boost to my business. I'd offer something like "if after 2 weeks, you don't like my work, we can cancel the contract and you don't have to pay anything."

By doing this I was able to charge literally twice as much – one of people's biggest concerns with a freelancer is that they have very little idea of how skilled you actually are. And no one ever asked for a refund.

(I was also pretty careful with my client selection though – I'd bring this up towards the very end of a negotiating phase, to avoid adverse selection.)

ChicagoBoy11• 7 years ago

So smart to not advertise it and instead just reveal it to customers you knew had a lower risk!

seanwilson6• 7 years ago

As a consultant, offering a limited money-back guarantee was a huge boost to my business. I'd offer something like "if after 2 weeks, you don't like my work, we can cancel the contract and you don't have to pay anything."
By doing this I was able to charge literally twice as much – one of people's biggest concerns with a freelancer is that they have very little idea of how skilled you actually are. And no one ever asked for a refund.

Not doubting you but how were you able to tell that was the influencing factor? Did anybody hint they were concerned they might not be happy with the final product?

Do you ask for any money upfront? I've heard of some people asking for 100% upfront with a refund guarantee.

I'll usually get some portion upfront and the rest on completion so they know they can withhold something if they're not happy.

SatvikBeri5• 7 years ago

Well, I can't know for sure. I went from charging $X/week and getting lots of resistance to charging $2X/week with the guarantee and getting almost no resistance, and several clients specifically mentioned the guarantee.

I didn't ask for anything up front then, but I probably would now that I have an established career and more options (although I'm not consulting anymore.)

Edit: also, $2X was honestly well above my market rate at that point, I charged that much initially because I was already booked. But that's more evidence that the guarantee tactic worked.

dalbasal• 7 years ago

I think this comes in different flavours.

(1) Sales Channel Flavour. This is a guarantee you use to improve conversion rates, by trying to remove any reluctance possible. This is usually where you find the "hoops" to lower the number of actual claimants.

Generally, highly optimized sales "funnels" are found in segments with high margins & high advertising costs. A 5% return rate is no big deal if you spend 40% on media/advertising.

(2) Heirloom Product. Say you sell a $500 camping knife. It's designed to last generations. Besides marketing, a lifetime guarantee frames the product mission in nicely concrete terms, with natural feedback mechanisms. IE, guaranteeing the product for life helps ensure you make it to last a lifetie.

(3) Just-easier flavour. This is more common now, with amazon/yelp/charegbacks/etc. Money back might just be the easier way of dealing with unhappy customers. For a mature company easy=cheap. For a startup, easy means minimizing "escalations:" Chargeback disputes, Let me speak to your manager, etc.

You need to watch out for no. 3. It could be in the "do things that don't scale" category.

WrtCdEvrydy5• 7 years ago

For physical tools, you can make the lifetime warranty basically reliant on returning the product.

'Return your grandfather's knife and we'll send you a new one you can pass down to your kids... because family matters'

devonkim• 7 years ago

That worked for Sears' Craftsman line-up but they wound up selling that business and I dunno how it's worked out for the acquiring company since.

seanwilson6• 7 years ago

I'm specifically concerned about one-time digital purchases, where once the customer has the file/valuable info there's nothing to stop them from keeping it and requesting a refund.

It's highly dependent on the product and who you're selling to. What are the specifics?

I have a subscription based Chrome extension [1] that will stop working if you refund. I offer 7 day refunds in place of my ability to offer free trials right now. I get minimal refund requests so it's not something I worry about and I'm not going to invest time in winning over people that don't see enough value in the product after seven days.

[1] https://www.checkbot.io/

nickjj4• 7 years ago

I think so. I'm very happy with my return rate percentage.

My video courses (tech courses on programming / ops) are a one time purchase and I offer a 1 year money back return policy, no strings attached. The only reason I even put a time limit on it is because without putting one, then it's not clear on how returns work or would require too many words to describe a lifetime return policy.

I'm a developer myself and having a 30 day return policy for information seems like a high pressure bullshit tactic. People live busy lives and trying to force someone into watching a 10 hour course RIGHT NOW otherwise they can't get a refund later on feels dirty.

In other words, I optimize for the happy path. I want to focus on making the experience as good as it can be for people who are interested in learning whatever topic they signed up for and aren't the type of person who will buy it, consume it and then return it.

The dishonest person who will buy your stuff, consume it, and then ask for a refund will do that with a 5 day, 30 day or 365 day return policy. That's just the type of person they are.

tobtoh• 7 years ago

People live busy lives and trying to force someone into watching a 10 hour course RIGHT NOW otherwise they can't get a refund later on feels dirty.

Absolutely. This is something I think companies get wrong so often.

As an example, Country Road (a clothing store in Australia) offers loyalty discounts based on your purchases - $10 reward voucher per $100-249 spend, or $35 per $250+ spend. Except, those vouchers expire after 30 days.

If I've just spent $250 on clothing, I'm unlikely to make additional purchases in the next 30 days. Their reward system doesn't encourage me to buy more clothes (there is only so much I can buy in a short period of time), and it does the opposite of encouraging my loyalty - it just makes me 'bitter' that I'm missing out on rewards.

verall2• 7 years ago

But they're not after you - they're after people that absolutely will get an "itch" to buy more clothes within 30 days, and they want to be the retailer picked.

Now, CVS receipts on the other hand -- often discounts expire within a couple days and I don't know anyone who shops for toiletries that often. I don't get it.

wolco• 7 years ago

What is the return policy for video issues (not playable?) or do you offer refunds if someone didn't like the content?

If it's the second the person would need to consume to make a judgement

nickjj4• 7 years ago

I've never had a situation where someone couldn't watch the videos due to a technical issue that wasn't possible to solve. I also allow people to download the videos locally so they can watch them offline (again optimizing for the happy path).

If they don't like the content, then I still issue the refund even if they watched the whole course. This type of refund is extremely rare in my case. Most people know what they're getting into before they buy the course because the sales page has a video going over what we'll cover and the page itself has a detailed description of what's included.

princeofwands• 7 years ago

We had a policy of "we only want satisfied customers". Being very forthcoming and easy-going with a return policy makes support super easy. When people complained, we pro-actively offered to reimburse them (sometimes they would even decline). This resulted in three things: It got rid of the cheapskates/difficult customers early on. It combatted negative reviews. It pleasantly surprised a few customers enough for them to put in free word of mouth or add positive reviews, sometimes adding up to 20 new customers. (The default is for customers to have to jump through hoops, excellent support can knock them off balance).

We started out with the guarantee and used it prominently in our marketing copy, so I don't have numbers on conversion rate improvement.

hartator• 7 years ago

I am running SerpApi (https://serpapi.com).

We do offer money back guarantee, but no free trial. Yes, it does increase conversions but not in a significant way. It’s also an effective way to avoid chargebacks and keep poeple happy.

bastawhiz• 7 years ago

I've always promised a refund to any customers asking in good faith. I run a podcast hosting company, and not every solution out there is right for everyone.

Most users requesting a refund made a mistake. I'm happy to refund them or offer credit, and the reputation I've built for customer support is well worth the cost. It comes out to tens of dollars a month in exchange for priceless unsolicited recommendations on social media (even from former customers and folks who haven't used the service).

There have been a few bad actors. One user demanded a refund for six months of service (we bill monthly) after finding that the service did not meet his needs. He did not receive the refund that he demanded. Of the hundred or so refunds that I issue each year, maybe one or two are not what the customer asked for.

jliptzin• 7 years ago

Don’t worry about a few bad apples taking advantage of a generous return policy. Keeping customers happy should be your primary concern, even those wanting a refund. They may even still leave you a good review afterwards! Plus, if someone’s unhappy and you don’t refund, they’ll just do a chargeback on their credit card which is much worse than a simple refund.

Sileni• 7 years ago

I'm gonna flip this on its head a bit; I've been that "bad actor" in the past, when I honest to god could not afford a course/book/whatever. Not "This will cut into my entertainment fund", more "I won't be able to pay rent if I pay for this".

I'm not in that position anymore, but a lot of my later purchases were based on what I learned while I was broke. Now I naturally default to O'Reilly books, for example, if I want a technical manual. Mostly because I downloaded a handful when I was in college.

If you're expecting your company to be around a while, there's a section of customers which will "abuse" your money-back guarantee, then later buy products from you legitimately, that wouldn't be accessible if you made it difficult to abuse the guarantee in the first place. And as many people have stated here, the "abuse" ends up being only a handful of people to begin with.

billmalarky• 7 years ago

This reminds me of Bill Gates comment that went something along the lines of "If they are going to be pirating software, I want them to be pirating _our_ software."

hnick• 7 years ago

The Photoshop model. I wonder how that's working out now with Adobe Creative Cloud.

zeroego• 7 years ago

I work in customer service at a medium sized food company. We have a no questions asked guarantee. I'm somewhat torn on the money-back guarantee philosophy. I hear people say that it ends up being profitable at the end of the day. But, it entitles people to complain (and expect compensation) about every last little thing. I have customers that call and ask if one of our products is Gluten Free. Nowhere on the label have we stated that it is. Yet, they are beside themselves to hear that it is in fact not gluten free. I then have to either send them a refund or a replacement for their own negligence. I've had to do this for people who have bought our whole wheat flour, expecting it to be gluten free, because we're known as a company that sells some gluten free items. Rewarding this kind of behavior, while reinforcing the BS "customer is always right" philosophy, must be to the detriment of society. I wish that we (USA) would do away with our conception of customer service and would adjust to something more akin to what you find in Europe. No facade, just people interacting, for better and for worse.

I'm ranting now, I guess I say all this to say, I could see having an absolute guarantee being profitable in the long run, but as the person who has to deal with entitled whiny consumers, I absolutely hate it.

jedberg2• 7 years ago

As a counterpoint to what is seems most people are saying, my friend had a mail order (and internet order eventually) business for 35 years, and they had a big sign on the wall of the sales floor that said,

"If you bought the wrong part, you now have a spare".

In other words, they never offered a refund, only replacement of the same product, and you had to send the old one back to prove it was broken on arrival.

People loved them and almost all of their customers ordered more than once, so it didn't seem to affect them much. But who knows, maybe they could have been a lot bigger offering refunds!

acconrad• 7 years ago

I run my own consulting firm and I offer a money-back guarantee.

I had one very short-term client who was dissatisfied with our service in spite of very clear deliverables. Nonetheless, I didn't hesitate for one second to give them back their money.

In simply offering to give them their money back, they refused the check and completely shifted their mentality towards us. They became advocates for us and then said they appreciated our work.

I've never had to give money back with a money-back guarantee and it has only strengthened our brand.

patio113• 7 years ago

Ran a business selling one-time digital purchases for years and have talked with many, many other people with similar businesses. We're basically unanimous on this: offer the guarantee, reap the marketing win, pull less hair out when dealing with very annoying customers. They have an attractive backstopping option if you don't offer the guarantee, which is calling up their bank and saying "Internet merchant didn't deliver as promised, give me the money back", which will get the refund anyhow and ding you on a fee (for processing the chargeback) and increment a counter at the payment processor that you very keenly do not want incremented above a certain number.

(Above comment in my personal capacity, not speaking as someone who is very professionally involved with that last clause.)

anitil• 7 years ago

Glad I ctrl-f'd your name - I was about to regurgitate my poorly remembered version of this from an old comment of yours.

vivan• 7 years ago

How does this work in line with your views on registration systems? I'm about to be releasing a product which also is a one-time digital purchase and I plan on just having a generous guarantee. I was planning on having no licensing system because frankly it's more headache than it's worth - the target audience will be happy to pay for the product and people who don't want to pay won't be paying anyway. Do you think this is a fair assessment? Do you think it's worth having a very basic registration system or none at all?

garganzol• 7 years ago

Money back guarantee is a good thing, go offer it. For a customer, it makes a purchase a no-brainer. For a seller, this is a good way to get rid of a toxic transaction early without loosing a nerve.

There will be some dudes who will try to exploit your pledge. But there is a trick: detect them early and use a more aggressive tactics.

For example, when someone claims your product does not work and needs an immediate refund after 5 minutes since the purchase and getting a license key, you can politely suggest them to do a chargeback themselves via the bank, because well, the product has a trial and it just cannot stop working just after entering the license key.

More often than not, such a customer will restrain from getting a refund and you will even get some respect points from them for doing a no-shit business.

RepressedEmu• 7 years ago

When we first launched https://www.Feastflow.com, a handcrafted lead gen service for freelance developers, we didn't offer a free trial or a money back guarantee and we got a lot of feedback that it was necessary. This might be a different perspective since we are a subscription service but having a "no questions asked" 30 day refund policy has definitely boosted our conversion and led to a much larger userbase. We found that our biggest sticking point was getting a user to give us a try and after experiencing the quality of our leads there is very little chance they ask for a refund.

noodle• 7 years ago

A lot of good answers already, but to add a slightly different perspective:

I'll always add a money back guarantee to any SaaS product where it makes sense. I believe it helps conversions, but I don't have data to back that up.

What it really does is help more easily identify the type of customer who would be a pain in the ass and costly to support, and give an easy way to fire them without it being a straight up "we don't want your business". Instead, its a "we're sorry we didn't live up to your expectations, per our guarantee, we're refunding you your last month and deactivating your account." or something to that effect, with variations based on circumstance. It turns a likely negative customer support interaction into a potentially positive one.

jkuria• 7 years ago

I saw this question and dug up the following useful excerpts. It includes the 'fail safe' "9 Point Checklist for Implementing Guarantees:"

https://capitalandgrowth.org/questions/1541/have-money-back-...

OldSchoolJohnny• 7 years ago

Thank you for asking this! I honestly never considered it before as we offer a free trial up front to combat refunds and make it harder to refund; but it makes perfect sense after reading all the other answers and has changed my mind completely.

muzani3• 7 years ago

We sold some physical products offline and online with 100% satisfaction guaranteed. Meaning that if they were unhappy with anything at all - quality, damaged packaging, or just isn't what they expected, we return all their money. And we empowered/encouraged customer service to give full refunds whenever they felt necessary.

The people who we offered to return rarely took the offer - they just wanted someone to listen to complaints. They also ordered 3 times more than the average. Out of the thousands of customers, nobody abused the system although we probably should have been more open about the policy.

I've done this earlier offline as a barista. We sold to a target market that wasn't familiar with overpriced coffee. We didn't want to give free trials, but every time someone is deliberating on it, we offer to return their money 100% if they buy a cup but didn't like it. No abuse, but it created a lot of fanatically loyal customers.

Tim Ferriss recommends doing a 110% return policy instead, which is probably more well suited if you expect them to do returns.

JunaidBhai• 7 years ago

I think money back guarantee has proved out to be one of the most important feature that converts fence sitters and eliminates free trial of our service.

I am a co-founder at Draftss (http://draftss.com) which is a productized graphic design, Web & App UI/UX with code service on monthly subscription. We offer a 7-day 100% money back guarantee if the customer is unhappy with the designs we create for them. Offering a money-back guarantee builds confidence for customer to sign up for our services.

We started 9 months ago and served 100+ customers and received 0 refund requests till date.

gotthealgo12• 7 years ago

If you are in the software industry a trial is going to be requested. 1st manage expectations example 1user 2 weeks and r u negotiating with a dm Or sponsor

mimixco• 7 years ago

Several brands got famous doing this. One of the earliest that comes to mind is Craftsman. You could return anything they made even years later, without a receipt. Nordstrom is also famous for this same policy. Amazon basically has this policy today, as does NewEgg. So does the kitchen goods company Zwilling J. A. Henckels.

Even though it seems like digital products might be easier to rip-off, they have nearly no cost to produce -- so the risk is higher for a seller of physical goods. They'll incur the cost of giving you a second product or refunding your money after you've used up a product so that it can no longer be sold again.

In selling services, I've always offered this policy. Few very people will take me up on it -- far less than 1%. Probably 0.2% in total. Knowing they can get their money back if not satisfied gives new customers the confidence to try me for the first time and encourages existing customers to spend more.

Studies have shown that most of your new business will come from existing customers. In this case, the cost of acquiring that business is probably less when it's just giving them a product (or a refund) vs. trying to acquire them from the market as a new customer through advertising.

paulcole• 7 years ago

I did community/support for an app that had a few thousand paid monthly subscribers.

I made it well know that I would give anyone who asked whatever they wanted for any reason. Just tell me what went wrong, I'll give you your money back and then I'll fix it.

People really seemed to love it. Sure there were the cheats who just wanted something for nothing. But the people who had legitimate gripes ended up being our biggest fans/champions on forums and Facebook groups.

Was definitely worth it.

vinrob92• 7 years ago

I am running a fully remote, unlimited design agency[0] with about 25 freelancers and project managers in various timezones.

We offer a 14 days, 100% money back guarantee. We do have some bad actors but I think the fact that design is highly subjective, the money back guarantee really convinces customers to try us. Currently we have less than 3% refunds.

[0] https://www.manypixels.co

Ask HN: Did offering a money-back guarantee help your business?

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